Best place to keep £5k emergency fund

comeandgo

My emergency fund is in cash, for the day the banks refuse to give me any money or when there is a power cut and no banks can work.

singhini

Can I get some clarity please with regards to the TESCO bank account.

I went to the TESCO website and yes they do have an account paying 3% on balances upto £3,000, however I cant see anything on their website saying you do not need to have any direct debits nor do you need to pay money into the account.

Also ive looked through the rest of this website (MSE) and I also cant find anything suggesting "the TESCO account at 3% is a no brainer, just put upto £3,000 into it and bobs your uncle, you will get 3% each month.............."


My question is - is it that simple, open a TESCO account at 3% and pop £3,000 into it and leave it alone (no DD, no paying money into or out of it and yes I can ignore it and it will earn 3%

YorkshireBoy

singhini wrote: »

Can I get some clarity please with regards to the TESCO bank account.

I went to the TESCO website and yes they do have an account paying 3% on balances upto £3,000, however I cant see anything on their website saying you do not need to have any direct debits nor do you need to pay money into the account.

Also ive looked through the rest of this website (MSE) and I also cant find anything suggesting "the TESCO account at 3% is a no brainer, just put upto £3,000 into it and bobs your uncle, you will get 3% each month.............."


My question is - is it that simple, open a TESCO account at 3% and pop £3,000 into it and leave it alone (no DD, no paying money into or out of it and yes I can ignore it and it will earn 3%

Yes.......

Ray_Singh-Blue

Keep your current account balance at or above £5k. Why make this any more complicated?

If it dips below £5k, by definition you have an emergency

redux

Ray_Singh-Blue wrote: »

Keep your current account balance at or above £5k. Why make this any more complicated?

There is £150 to £250 a year of interest (or more, if the reserve gradually creeps upwards) to be had by choosing accounts as discussed above, for the sake of just a few minutes setting them up.

singhini

from what I can see, I would stick £2,500 in a TESCO account at 3% (opening two accounts).

Simple and quick, no need to set up direct debits or pay money in and earning £88 per year per account (£176 per year)

Here's a link - I'm going to open 2 accounts now and stick £3,000 in each

http://www.moneysavingexpert.com/banking/compare-best-bank-accounts#tesco

Norscbu

I see you have a loan and a mortgage, would it not make more sense to pay 5k of that off?

Eco_Miser

singhini wrote: »

I went to the TESCO website and yes they do have an account paying 3% on balances upto £3,000, however I cant see anything on their website saying you do not need to have any direct debits nor do you need to pay money into the account.

It's very rare for organisations to say what you don't need to do to join them. Could you find anywhere on Tesco's site that said you do need to have any direct debits or need to pay money into the account?

bowlhead99

Norscbu wrote: »

I see you have a loan and a mortgage, would it not make more sense to pay 5k of that off?

If the objective of the "emergency fund" money is to get you through an emergency, and it will earn 3-5% while waiting for that emergency to come along, it could be shortsighted to instead use it to clear some affordable debt or mortgage (which might well be costing under 5% anyway).

If/when the emergency happens, that's when the emergency savings stash comes into its own. If you'd paid down a mortgage or settled a loan, and then needed the money, you'd be faced with having to ask for a remortgage or go to a bank cap in hand to borrow money, maybe at unattractive rates (e.g. loan or credit card purchase at 10-20%).

"Hey loan/mortgage company, lend us £5000" ;"ok how much do you earn" ; "Erm, nothing, I'm unemployed, that's why I'm desperate for cash, oh and I need a new car or boiler, one or both of them just packed up. Damn I wish I had £5k and a £100k mortgage instead of £nil and a £95k mortgage"

I'm not ashamed to say I have a cheap outstanding loan which I'll be topping up to a larger balance in the next few months, and a long term (2 yr+ remaining) 0% credit card balance. Effectively paying a blended interest rate of maybe 2%(including the cc balance transfer fee) to "rent" a larger emergency fund or cash balance than I would otherwise have -having used a chunk of my own savings to do things like funding pension contributions to get lucrative tax relief. But still wanting to be solvent rather than only have a couple of months spending money in the bank. And the money in the bank can earn the 2% back for me (or close to it, without much work)

I know others on here will do similar.

singhini

Eco_Miser wrote: »

It's very rare for organisations to say what you don't need to do to join them. Could you find anywhere on Tesco's site that said you do need to have any direct debits or need to pay money into the account?

Hi, I couldn't find anything on TESCO's website but I intend to ring them tomorrow to discuss (you can open an account online or call 0345 8353353). I was busy opening my Virgin money ISA today (as per my other thread you kindly helped with )

on the MSE website it does suggest there's no minimum pay-in to get the interest but nothing about DD's http://www.moneysavingexpert.com/banking/compare-best-bank-accounts (scroll three quarters down and you should find TESCO).

As soon as I have called them tomorrow I will feed back and let you know what they said.